Before you finalize your shoe order in two sizes, consider the potential costs associated with returning one pair. Shipping fees could significantly impact your budget.
A recent report published on October 15 by the National Retail Federation and Happy Returns, a logistics company under UPS, reveals that 72% of U.S. retailers now impose charges for at least one return method, indicating a rise from 66% last year. This shift reflects the changing landscape of e-commerce.
In recent years, retailers have gradually scaled back on one of the most attractive features of online shopping: free returns. The driving factors behind this trend include escalating shipping costs, economic uncertainties, and the increasing expenses linked to processing the billions of dollars’ worth of merchandise anticipated to be returned this year.
Notable retailers such as Zara, H&M, and Amazon have begun implementing minor fees for specific returns. This trend indicates a significant recalibration in the retail sector as companies reassess the financial viability of online shopping. For example, Amazon recently introduced a $1 fee in 2023 for return drop-offs at UPS stores, provided that a free return option, like a Whole Foods or Amazon Fresh drop-off location, is available nearby.
“Navigating the current landscape of e-commerce is quite challenging,” states Tim Fehr, chief operating officer at Happy Returns, in a conversation with Money. “Before the pandemic, the focus was primarily on rapid growth and ensuring customer satisfaction, regardless of the associated costs.”
In the post-pandemic era, as growth rates have slowed and costs have escalated, retailers have shifted their focus toward operational refinement and maintaining profitability, he explains.
“These trends are ongoing, and merchants face additional challenges due to regulatory and tariff changes,” Fehr adds. “Many retailers are actively seeking innovative strategies to thrive in this evolving environment.”
This adjustment is not merely a strategic decision; it has become a financial imperative. The NRF report indicates that retailers anticipate that 15.8% of their total annual sales—both online and in physical stores—will be returned this year, amounting to approximately $849.9 billion.
Online returns are expected to represent 19.3% of sales, with Gen Z shoppers leading this trend. Shoppers born between 1997 and 2012 reported an average of nearly eight returns over the past year, while Baby Boomers averaged just five returns, highlighting the generational differences in shopping behavior.
The pressures driving these changes extend beyond just shipping costs. Brandon Yoshimura, a director in consumer retail at Solomon Partners, emphasizes that the post-pandemic climate has compelled companies to reevaluate their financial absorption capabilities.
“The pandemic initiated a shift away from the ‘frictionless’ model of free shipping and returns in e-commerce,” he remarks in an email to Money, referring to supply chain disruptions, rising container prices, and an increase in the volume of returns. “The combined pressure from tariffs, inflation, and other costs is prompting companies to scrutinize every aspect of their operations to enhance profitability.”
For numerous retailers, covering these costs has become an unsustainable burden, particularly for businesses already operating on narrow profit margins.
Yoshimura cites examples like Warby Parker, which recently announced plans to phase out its popular Home Try-On program after 15 years, highlighting the trend of retailers reevaluating costly customer conveniences. This program allowed customers to order up to five frames to try on at home, with free shipping and returns included.
“In the long run, I believe this will deter consumers from engaging in costly behaviors, such as ordering multiple sizes, while also emphasizing the value of physical retail as a complement to online shopping,” he predicts.
What changes are occurring in the return policies that affect online shopping?
For many years, consumers have become accustomed to over-ordering, facilitated by the conveniences of free and fast shipping. Shoppers would purchase multiple sizes, colors, or options, confident in the knowledge that they could return most items without incurring costs. However, with retailers now implementing fees, these habits are becoming more costly. As businesses strive to introduce fees, returns are increasingly influencing how consumers approach online shopping.
Free returns, instant refunds, and convenient drop-off options remain critical priorities for consumers. According to the NRF report, shoppers are now more frequently checking return policies before finalizing purchases. A negative experience with returns can significantly impact brand loyalty and consumer trust.
In fact, approximately 82% of consumers consider free returns a crucial factor when shopping online, which is an increase from 76% last year. Moreover, 71% of shoppers indicate that a poor return experience would discourage them from purchasing from that retailer in the future.
Simultaneously, consumers are discovering strategies to avoid fees. Some choose to drop off returns in-store or utilize package-free return options, while others are becoming more mindful of return windows, as many retailers are shortening these periods as well.
Despite the fact that consumers continue to spend, with retail expenditures reaching $732 billion in August, marking a 5% increase from the previous year according to the Census Bureau, they are becoming more discerning about their purchases and retention.
The increasing costs associated with returns may reduce impulse buying and shift consumer habits, but experts believe it does not signify the end of free returns altogether.
“There hasn’t been a fundamental shift; rather, we are observing heightened scrutiny and refinement of return policies,” Fehr explains. “Many leading retailers continue to offer free returns, and I believe that many will sustain this approach for the foreseeable future.”
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